SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 1996 Commission File Number 2-95219 INDIAN RIVER CITRUS INVESTORS LIMITED PARTNERSHIP (Exact name of small business issuer as specified in its charter) Massachusetts 04-2859087 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization One International Place, Boston, MA 02110 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 330-8600 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO INDIAN RIVER CITRUS INVESTORS LIMITED PARTNERSHIP (DEBTOR-IN-POSSESSION) PART I - FINANCIAL INFORMATION STATEMENT OF OPERATIONS (UNAUDITED) (NOTE 1) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1996 1995 1996 1995 ---------- -------- -------- ------ Fruit Sales $ - $3,293,769 $ 707,598 $4,008,318 Less - Harvesting expenses - 812,702 155,541 1,038,772 ---------- ---------- ---------- ---------- Net Fruit Sales - 2,481,067 552,057 2,969,546 Cost of Fruit Sales - 1,370,655 257,840 1,769,115 ---------- ---------- ---------- ---------- Operating Margin - 1,110,412 294,217 1,200,431 Other Revenues: Interest income - 53,256 28,919 75,652 Other Expenses: Interest expense (Note 3) 159,562 651,821 697,181 1,296,478 Grove management fees 14,252 49,417 65,809 100,900 Partnership management fees - 75,000 84,000 150,000 Real estate taxes 17,965 17,929 34,065 32,629 Amortization - 11,416 4,692 22,832 Building depreciation - 1,822 - 4,190 General Administrative - 16,357 53,291 34,462 ---------- ---------- ---------- ---------- 191,779 823,762 939,038 1,641,491 ---------- ---------- ---------- ---------- Earnings before reorganization items (191,779) 339,906 (615,902) (365,408) ---------- ---------- ---------- ---------- Reorganization items: Net fruit sales 2,184,622 - 2,184,622 - Cost of sales (1,379,966) - (1,379,966) - Grove management fees (41,072) - (41,072) - Partnership management fees (84,000) - (84,000) - General and administrative (52,084) - (52,084) - Interest earned on accumulated cash 28,582 - 28,582 - ---------- ----------- ---------- ------ 656,082 - 656,082 - ---------- ----------- ---------- ------ Net Income/(Loss) $ 464,303 $ 339,906 $ 40,180 $ (365,408) ========== ========== ========== ========== Net Income/(Loss) allocated to General Partner $ 46,430 $ 33,991 $ 4,018 $ (36,541) ========== ========== ========== ========== Net Income/(Loss) allocated to Limited Partners $ 417,873 $ 305,915 $ 36,162 $ (328,867) ========== ========== ========== ========== Net Income (Loss) per Unit of Limited Partnership Interest $ 26.96 $ 19.74 $ 2.33 $ ( 21.22) ========== ========== ========== ========== The accompanying notes are an integral part of these financial statements. INDIAN RIVER CITRUS INVESTORS LIMITED PARTNERSHIP (DEBTOR-IN-POSSESSION) BALANCE SHEETS ASSETS (NOTE 1) June 30, December 31, 1996 1995 (Unaudited) (Audited) Current Assets: Cash and cash equivalents......................................... $ 4,566,035 $ 2,676,875 Accounts receivable............................................... - 329,413 Inventory......................................................... 1,098,068 1,792,035 Other assets...................................................... 24,614 64,660 ----------- ----------- $ 5,688,717 $ 4,862,983 Property, net......................................................... 18,066,390 18,401,799 Deferred financing costs............................................. - 4,692 ----------- , ----------- $23,755,107 $23,269,474 =========== =========== LIABILITIES AND PARTNERS' CAPITAL Liabilities Not Subject to Compromise: Current Liabilities: Accounts payable-trade ........................................... $ 35,499 $ 33,179 Other liabilities................................................. 65,947 150,331 ----------- ----------- Total Current Liabilities .................................... 101,446 183,510 Notes payable..................................................... - 22,869,735 Accrued interest.................................................. - 767,970 Liabilities Subject to Compromise (Note 4)............................ 24,165,222 - ----------- ----------- 24,266,668 23,821,215 Partners' Capital: Limited Partners, $1,000 stated value per Unit; 15,500 Units authorized, issued and outstanding................................................ 690,200 654,038 General Partner................................................... (1,201,761) (1,205,779) ----------- ----------- $23,755,107 $23,269,474 =========== =========== The accompanying notes are an integral part of these financial statements. INDIAN RIVER CITRUS INVESTORS LIMITED PARTNERSHIP (DEBTOR-IN-POSSESSION) STATEMENTS OF CASH FLOWS (UNAUDITED) (NOTE 1) SIX MONTHS ENDED JUNE 30, ------------- 1996 1995 -------- ------ Cash Flows From Operating Activities: Cash received from customers...................................... $ 673,758 $ 4,107,420 Cash paid to suppliers............................................ ( 252,630) (1,978,622) Interest received................................................. 28,919 75,652 Interest paid..................................................... ( 149,556) ( 1,463,833) ----------- ----------- Net cash provided by operating activities..................... before reorganization items..................................... 300,491 740,617 ----------- ----------- Operating cash flows from reorganization items: Cash received from customers during reorganization............................................... 3,205,911 - Interest received on cash accumulated because of the Chapter 11 proceeding................................. 28,582 - Cash paid to suppliers during reorganization.......... (1,495,824) - Interest paid during reorganization............................... (150,000) - ----------- ------- Net cash provided by reorganization items......................... 1,588,669 - ----------- ------- Net cash provided by operating activities......................... 1,889,160 740,617 ----------- ----------- Cash Flows From Investing Activities: Capital expenditures.............................................. - (12,353) ----------- ----------- Net cash used in investing activities............................. - (12,353) ----------- ----------- Net Increase in Cash and Cash Equivalents....................................................... 1,889,160 728,264 ----------- ----------- Cash and Cash Equivalents at Beginning of Period......................................................... 2,676,875 3,124,628 ----------- ----------- Cash and Cash Equivalents at End of Period............................ $ 4,566,035 $ 3,852,892 =========== =========== The accompanying notes are an integral part of these financial statements. INDIAN RIVER CITRUS INVESTORS LIMITED PARTNERSHIP (DEBTOR-IN-POSSESSION) STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED) (NOTE 1) Reconciliation of net loss to net cash provided by operating activities: SIX MONTHS ENDED JUNE 30, ------------- 1996 1995 -------- ------ Net (Loss) Income $ 40,180 $ (365,408) Adjustments to Reconcile Net Loss to Net Cash Provided (Used) By Operating Activities: Depreciation and amortization................................ 4,692 27,022 Decrease (Increase) in: Accounts receivable..................................... 329,413 99,102 Inventory............................................... 693,967 635,383 Other assets............................................ 40,046 10,637 Increase (Decrease) in: Accrued interest........................................ 397,626 (167,355) Accounts payable and other liabilities..... (82,064) 167,944 Postpetition payables and other liabilities..................................... 129,891 - Depreciation capitalized to inventory........................ 335,409 333,292 ----------- ----------- Net Cash Provided by Operating Activities............................. $ 1,889,160 $ 740,617 =========== =========== Disclosure of accounting policy: For purposes of the statement of cash flows, the company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. INDIAN RIVER CITRUS INVESTORS LIMITED PARTNERSHIP (DEBTOR-IN-POSSESSION) STATEMENT OF CHANGES IN PARTNERS' CAPITAL FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED) (NOTE 1) Limited Partners General Units Capital Partner Total Balance, December 31, 1995 15,500 $ 654,038 $(1,205,779) $ (551,741) Net Loss 36,162 4,018 40,180 ---------- ---------- ----------- ----------- Balance, June 30, 1996 15,500 $ 690,200 $(1,201,761) $ (511,561) ========== ========== =========== =========== Balance, December 31, 1994 15,500 $2,256,415 $ (1,027,737) $2,513,435 Net Loss (328,867) (36,541) (365,408) ---------- ---------- ----------- ---------- Balance, June 30, 1995 15,500 $1,927,548 $(1,064,278) $ 863,270 ========== ========== =========== ========== The accompanying notes are an integral part of these financial statements. INDIAN RIVER CITRUS INVESTORS LIMITED PARTNERSHIP (DEBTOR-IN-POSSESSION) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1996 (UNAUDITED) 1. ACCOUNTING AND FINANCIAL REPORTING POLICIES The condensed financial statements included herein have been prepared by the Partnership, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The Partnership's accounting and financial reporting policies are in conformity with generally accepted accounting principles and include all adjustments in interim periods considered necessary for a fair presentation of the results of operations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Registrant's latest annual report on Form 10-K. The accompanying financial statements reflect the Partnership's results of operations for an interim period and are not necessarily indicative of the results of operations for the year ending December 31, 1996. 2. TAXABLE INCOME (LOSS) The Partnership's taxable loss for 1996 is expected to differ from that for financial reporting purposes primarily due to accounting differences in the recognition of results of operations. 3. INTEREST EXPENSE Interest expense on the Caulkins note has been accrued through March 4, 1996, the date of the Chapter 11 filing. Assuming the same rate of interest as under the terms of the note, additional interest expense for the period March 5, 1996 through June 30, 1996 would be $697,045 for a six months total of $1,075,102. 4. LIABILITIES SUBJECT TO COMPROMISE Liabilities subject to compromise consist of the following: Secured debt, 8% secured by first mortgage on property $ 8,000,000 Accrued interest on first mortgage 65,968 Secured debt, 14.5% secured by second mortgage on property 14,869,735 Accrued interest on second mortgage 1,099,628 Trade and other miscellaneous claims 129,891 ----------- $24,165,222 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION This Item should be read in conjunction with the financial statements and other items contained elsewhere in the report. Liquidity and Capital Resources The Partnership's only business is owning and operating a commercial citrus grove consisting of approximately 3,150 acres of land and related improvements and equipment located near Stuart, Martin County, Florida (the "Grove"). The two mortgages encumbering the Grove were scheduled to mature on January 31, 1996. The first mortgage was extended to May 30, 1996. In February, 1996, the holder of the second mortgage, Caulkins Citrus Company ("Caulkins"), terminated negotiations with the Partnership with respect to a loan modification, declared a default and commenced foreclosure proceedings. In addition, a receiver was appointed to collect revenues and take over control of the Grove. On March 4, 1996, as a result of the pending foreclosure proceeding instituted by Caulkins, the Partnership filed for protection under Chapter 11 of the United States Bankruptcy Act in the Federal District Court for the State of Florida, Southern District (Case No. 96-30843-BKC-SHF). In connection with the bankruptcy the Partnership resumed legal possession of the Grove and its accounts and the Receiver was removed. The Partnership has submitted its plan of reorganization to the Bankruptcy Court. Creditors of the Partnership also have the right to submit plans to the Bankruptcy Court. Pursuant to the terms of the Partnership's plan, the existing mortgage debt would be extended five years and the Partnership would agree to use its reserves to fund any cash flow shortfalls. There can be no assurance that the Bankruptcy court will approve the Partnership's plan. If the Partnership is not permitted to reorganize under the Bankruptcy Act or cannot reach an agreement with the existing lenders, the Partnership will lose the Grove in a foreclosure proceeding. In addition, if the Partnership's or a similar plan were to be adopted, it is unlikely that the Partnership will be able to achieve earnings which will enable or permit the Partnership to make distributions to its partners. At this time, it appears that investors will not receive a return of a substantial portion of their original investment in the Registrant. The level of liquidity based on cash and cash equivalents experienced a $1,889,160 increase at June 30, 1996 as compared to December 31, 1995. This increase is primarily due to the fact that there was no debt service payment made during the first six months of 1996. The Partnership invests its working capital reserves in a money market account or repurchase agreements secured by United States Treasury obligations. RESULTS OF OPERATIONS Operating results improved by $405,588 for the six months ended June 30, 1996 as compared to 1995 due to a decrease in interest expense of $599,297, which offset a decrease in the operating margin on fruit sales of $101,558, a decrease in interest income of $18,151 and an increase in other expenses of $74,000. Interest expense decreased by $599,247 because no interest was accrued for the Caulkins note after March 4, 1996, the date of the Chapter 11 filing. If interest expense on the note had been accrued through June 30, 1996, there would have been $697,045 of additional expense. The operating margin on fruit sales decreased by $101,558 for the six months ended June 30, 1996 as compared to 1995 due to a decrease in the number of boxes of fruit harvested during the 1995-96 crop year, 562,170, compared with 740,390 for the 1994-95 crop year, a decrease of 24%. Taking into account the timing of the harvest, the number of boxes harvested during the calendar year decreased from 558,770 during the first six months of 1995, to 449,850 for the same period of 1996. This decrease was due to adverse weather conditions, and was partially offset by a slight increase in the price received per pound-solid of fruit. The harvesting expense per box cost remained constant for the six months ended June 30, 1996 as compared to 1995 at approximately $1.90 per box. The increase in other expenses of $74,000 was attributable to an increase in general and administrative expenses of $70,913. This increase was due primarily to legal and other costs related to the Chapter 11 filing. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K No Report on Form 8-K was required to be filed during the period. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INDIAN RIVER CITRUS INVESTORS LIMITED PARTNERSHIP (Registrant) By: Winthrop Agricultural Management, II, Inc. General Partners By: /s/ Edward V. Williams Edward V. Williams Chief Financial Officer By: /s/ Michael Ashner Michael Ashner Chief Executive Officer DATED: August 14, 1996